July 7, 2022

Facebook parent Meta’s stock is soaring after the company reported first-quarter profits and daily user counts that beat Wall Street’s expectations. Shares were up sharply in after-hours trading, going up as much as 15% above their closing price.

That’s despite the company’s slowest revenue growth since going public a decade ago.

Meta earned $7.47 billion in the January-March period, down 21% from $9.5 billion during the same period a year earlier.

Revenue rose 7% to $27.91 billion — the slowest growth rate in a decade for the online advertising powerhouse that generally reports sales growth in the double digits. Russia’s war in Ukraine was a hit to revenue, CEO Mark Zuckerberg said.

“We’ve been blocked in Russia, and we decided to stop accepting ads from Russian advertisers globally,” Zuckerberg told investors on a call Wednesday. 

Reversing a bad quarter

Meta’s results, while mixed, mark a turnaround from the last three months of 2021, when Facebook reported a drop in users and projected spending up to $10 billion in one year to build out metaverse-related technology.

In March 2022, Facebook had 1.96 billion daily active users on average, an increase of 4% year-over-year. That served to reassure investors that last year’s decline was a blip, rather than a sign of things to come.

The company spent $2.9 billion that quarter on Reality Labs. That trend should continue, as Zuckerberg told investors he expects revenue from the company’s social apps to fund VR development for the metaverse for the next few years.

“I recognize it’s expensive to build this — it’s something that’s never been built before and it’s a new paradigm for computing and social connection,” he said.

Tech giants have mixed results

Meta cut a sharp contrast with Google parent Alphabet, which on Monday reported disappointing earnings, with profit below Wall Street’s expectations. Google also reported a revenue growth slowdown, but for Meta this appeared to have been mitigated by an increase in daily active users that “was enough to send the shorts covering and the stock surging,” said Jesse Cohen, senior analyst at Investing.com.

“That being said, it was a mixed report overall as the social media giant continues to struggle with slowing revenue growth amid reduced ad spending amid the current inflationary environment,” Cohen said.

Recent privacy changes by Apple have made it harder for companies like Meta to track people for advertising purposes, which also puts pressure on the company’s revenue. For months now, Meta has been warning investors that its revenue can’t continue to grow at the same breakneck pace they are accustomed to, so it’s likely that the quarter’s single-digit revenue growth was already baked into investor expectations.

Shares of the Menlo Park, California-based company rose $27.12, or 15.5%, to $202.07 in after-hours trading.

The stock has taken a hit this month amid news of Elon Musk’s Twitter buyout and ended regular trading at $174.95 — down 48% since the beginning of the year.

CBS News’ Musadiq Bidar and Irina Ivanova contributed reporting.

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